If you live in a planned community that has covenants, you most likely have to pay monthly Homeowners' Association (HOA) fees and, at times, special assessments—often collectively referred to as “assessments.”
An HOA has a board of directors. Each year, the board will come up with a budget for the community that includes how much each unit or household will be charged as a monthly HOA fee during the year. (Learn more about homeowners’ associations in our article Homeowners' Associations (HOAs) and CC&Rs.)
Generally, the monthly HOA fee consists of two parts:
So long as the HOA board is able to accurately predict which repairs will come due and when, the monthly dues should cover the current operating expenses as well as long-term repairs.
But the board’s predictions are not always accurate. Occasionally, the HOA might need to come up with funds in excess of the money raised by the monthly fees. In that case, the board usually has the authority to impose a special assessment to cover the one-time expense of a major repair or improvement.
There are several possible reasons why the monthly fees might not provide enough to the reserves to cover long-term repairs. For example:
Most HOAs have the power to place a lien on the homeowner’s property if he or she doesn’t pay the monthly dues and/or any special assessments. Once the HOA has a lien on a homeowner’s property, it may foreclose on that lien as permitted by the CC&Rs and pursuant to state law. (Learn more in Nolo’s article HOA Liens & Foreclosures: An Overview.)
If you're facing a foreclosure due to unpaid HOA assessments, consider talking to a foreclosure attorney in your state to discuss all legal options available in your particular circumstances.